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October 25, 2021

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Property tax reforms to be widened to fight speculation

China is set to expand pilot property tax reforms, domestic media reported, as the government battles real estate speculation in the world’s second-biggest economy.

The top decision-making body of the Chinese parliament said on Saturday it will roll out the tax in some regions.

The move aims to advance the property tax legislation and reform in an active and prudent way, guide the rational housing consumption and the economical and intensive use of land resources, and facilitate the steady and sound development of the country’s property market, it was reported.

The State Council will determine which regions will host the pilot tax and other details, Xinhua news agency added.

It was decided that the State Council and related departments, as well as local governments, need to create scientific and feasible approaches and procedures for tax collection and management.

The Ministry of Finance and the State Taxation Administration will draft the measures for piloting the property tax and make preparations for the work in accordance with the authorization of the NPC Standing Committee, officials from the ministry and administration said.

A tax may finally tame the country’s red-hot home prices, which have soared more than 2,000 percent since the privatization of the housing market began in the 1990s in a fast-urbanizing China. In recent years it created an affordability crisis, especially among the millennials.

The real estate tax will apply to residential and non-residential property as well as land and property owners, but does not apply to legally owned rural homes and residences which are appended, Xinhua reported.

The pilot schemes will have a duration of five years from the issue of the details from the State Council.

The idea of a levy on homeowners first surfaced in 2003 but has failed to take off due to concerns that it would damage property demand and tank home prices, hurting household wealth and future real estate projects.

In pilot programs rolled out in 2011, the megacities of Shanghai and Chongqing have taxed homeowners, albeit just those possessing higher-end housing and second homes, at rates from 0.4 percent to 1.2 percent.

But until now the pilots have not been widened to more cities.

China’s housing market took off after key 1998 reforms sparked a building boom on the back of rapid urbanization and wealth accumulation.

But as prices soared, so did worries about wealth disparity and the resulting potential for social instability.


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